Microsoft Faces Uphill Battle In Supreme Court Patent Fight

Microsoft (NSDQ: MSFT) has assembled an impressive coalition of corporations to support it in a landmark patent battle that the U.S. Supreme Court heard today, but it could be all for naught. The justices had tough questions for both sides, but with the Obama Administration supporting Microsoft’s opponent, it’s not going to be an easy win for the software giant. The case could have a major impact on technology and digital media companies, which have faced a growing mountain of patent lawsuits in recent years.

The lawsuit involved a small Canadian company called i4i, which sued Microsoft arguing that Microsoft Word’s XML editor infringed its patent. i4i won the case at district court and again on appeal, winning a total of $290 million in damages and an injunction that forced Microsoft to remove the feature from Microsoft Word.

Microsoft has appealed those losses by challenging what has become a basic rule of modern patent litigation: that defendants who want to show a patent is invalid and shouldn’t have been granted must prove their case by a standard known as “clear and convincing evidence.” Microsoft is arguing that the standard should be lower, particularly when defendants have new evidence that wasn’t considered by the Patent Office before it granted the patent in question.

A large coalition of tech and internet companies, along with public interest groups, are backing Microsoft. Those companies are frequent defendants in patent lawsuits, and would like to see Microsoft win in this case, which would make it easier for them to win most of their patent lawsuits. On the other side, pharmaceutical and biotech companies–which tend to be plaintiffs in patent cases–are backing i4i.

In today’s arguments, the justices didn’t give any clear indication of how they would rule. But there were a few signs that didn’t look good for Microsoft. For example, Justice Stephen Breyer, who has voted consistently to rein in patent rights in past cases, pursued a line of questioning suggesting that he thought the problem of bad patents being enforced could be dealt with in different ways; including patent reexaminations, and judges who give more careful jury instructions in patent cases. Justice Ruth Ginsburg also seemed skeptical of Microsoft’s argument, asking questions about why they shouldn’t assume Congress wanted a tough burden for defendants.

Only eight justices will be voting in this case, because Chief Justice John Roberts holds Microsoft stock and has recused himself. That means one outcome of the case could be a 4-4 tie vote. If that happens, the appeals court ruling will stand, which would be a win for i4i.